Analysts see years of losses at ATA in Malaysia after main customer Dyson severed relationship

KUALA LUMPUR, Nov. 26 (Reuters) – Analysts predict years of losses at ATA IMS Bhd in Malaysia (ATAI.KL) and challenges in gaining new clients following revelations about forced labor that drove the main client Dyson Ltd to sever ties.

Shares of ATA, which makes parts for Dyson vacuum cleaners and air purifiers, fell 36.6% on Friday after Dyson told Reuters it had terminated contracts with the Malaysian supplier, with effective June 1 of next year following an audit of the company’s work practices and allegations. by a whistleblower. Read more .

The stock has lost more than half of its value since the report was released on Thursday.

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AmInvestment Bank said in a memo that the full impact of Dyson’s exit is expected in fiscal 2023, which would “have a severe impact” on ATA’s earnings that year and beyond.

Dyson contributes approximately 80% of ATA’s revenue.

“We also anticipate challenges ahead… in securing new orders given its damaged reputation and the current labor shortage crisis, which is considered an operational risk until a concrete solution is found. emerges, ”the note says.

ATA may have enough time to replace some of its lost orders with other existing customers, AmInvestment added.

ATA did not respond to a request for comment from Reuters. On Thursday, the company said it took steps to engage Dyson and advisers after being made aware of the audit summary of the work. The company also said its board is reviewing the validity of Dyson’s termination notice.

Another analyst covering the company also forecasts two to three years of losses and said ATA could face “a lot of obstacles” to increasing production for other customers given the allegations.

Rival electronics manufacturing service providers SKP Resources (SKPR.KL) and VS Industry (VSID.KL) could benefit from Dyson’s withdrawal from ATA, analyst said, declining to be named due to sensitivities .

SKP shares rose 10.6% while VS rose 8.5% after the news broke on Thursday.

The ATA may seek to repay short-term debts during the notice period, the analyst said.

“The electronics manufacturing services industry is lucrative. There are many products they can look into, especially with the growing trend of the Internet of Things. However, ATA might have a hard time getting new customers.” , said the analyst.

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Reporting by Liz Lee; Editing by Muralikumar Anantharaman and Lincoln Feast.

Our standards: Thomson Reuters Trust Principles.

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